/ world today news/ In 200 days as chancellor, Olaf Scholz destroyed what his predecessors Gerhard Schröder and Angela Merkel had been building for thirty years. The German economy collapsed like a house of cards. Already in the fall, terrifying statistics will come out about the decline in GDP, the decline in industrial production, the decline in real incomes of the population and the raging inflation. The country is falling into a structural crisis.
Germany was the country that benefited the most from the collapse of the Soviet Union. The republic managed not only to restore unity – the unification of the GDR and the FRG gave a powerful impetus to the consolidation of Europe and the economic expansion of Germany in Western Europe, as well as in China, which bought a lot of machinery and equipment.
With the fall of the Iron Curtain, economic borders also collapsed. The FRG gained access to the cheap (developed) resource base of the CIS countries and the post-Soviet space. German business received not only a huge market for sales, but also the opportunity to integrate many countries into its economic project – the Eurozone. In the last thirty years, something has happened that the country could not achieve as a result of two world wars: the unification of Europe and the conquest of resource and sales markets not by force of arms, but by economic power. German machinery and equipment became a symbol of Europe’s economic success.
For several decades, step by step, day by day, German workers forged Berlin’s economic triumph in Eurasia. The foreign economic expansion and growth of the German economy is perfectly reflected by the trade surplus. Since 1991, it has been growing systematically, without going into the red either during the crisis of 1998, nor in 2008, nor even during the coronavirus. For 30 years, every month Germany has sold more to the outside world than it has taken from it.
Interestingly, the trade turnover between Russia and Germany in the last twenty years corresponds to the concept of “partnership”. Russia buys from Germany about as much as the Germans bought from the Russians – an economic idyll. It is clear that oil, oil products, gas and coal come mainly from Russia.
In view of economic crises, trade between the two countries grew until the revolution in Ukraine in 2014. Then Crimea happened and the development of the partnership slowed down: Russia began to buy less and less from Germany, and after 2014 there was a noticeable decline in energy prices, which reduced the FRG’s costs for purchases in Russia.
The “partnership” did not last in the new deterioration of relations in Ukraine. From a statistical point of view, however, the discord initiated by Germany seems strange: exports from Germany to Russia have fallen to the level of twenty years ago, while imports from Russia to Germany are setting records. The result is a record deficit for Germany in trade with the Russian Federation. This resulting imbalance is a double whammy for the German economy.
Thus, in May 2022, Germany registered a trade deficit for the first time in thirty years. This suggests that the old model of buying cheap (post-Soviet) raw materials and producing high-tech products from them is outdated. Germany, and with it all of Europe, are entering a structural crisis. The problems of the German economy, as well as of the entire European economy, are perfectly reflected by the exchange rate of the euro, which fell against the dollar to a twenty-year low – almost to parity. Such a course suggests that capital is fleeing the Old World, seeing no prospect there.
The basis of the deficit of the trade balance of Germany, and with it also of France, Italy and other countries, is formed by the sharply increased prices of energy carriers, above all natural gas, whose price on the stock exchange reached 1900 dollars per thousand cubic meters. This level of gas prices in oil equivalent corresponds to a price of 300 dollars per barrel, while on the spot (delivery here and now) quotations are even higher. It is clear that such prices are prohibitive for the industry and the population. And given that domestic gas prices in the US and Russia are ten times lower, this makes any energy-intensive activity in Europe economically pointless. The US and Russia, providing themselves with oil, gas and related products, look much more promising compared to Europe.
The military pathos of European politicians was also in vain. No one is seriously discussing the seventh package of sanctions against Russia anymore. The main political thought is directed at the question of how to deal with the losses. The panic in the German government is particularly palpable. The strategy of the German government to replace Russian gas, drawn up by Vice-Chancellor Habeck, “failed and will not be able to provide the necessary gas next winter”, writes “Bild”. The problem turned out to be trivial: the market simply does not have the necessary gas tankers to transport LNG.
Against this background, last week there was a bargain between the governments of Germany and Canada to send the Siemens turbines back to Germany. This turbine, which was working on the Nord Stream gas pipeline, went to Canada for maintenance and got stuck there because of the sanctions. As a result, the pressure in the Nord Stream, which feeds Germany, dropped. And at the beginning of July it became known that the turbine is still coming back. Against the background of the crisis on the gas market in Germany, discussions have begun at an expert level on the launch of the long-suffering Nord Stream-2, despite being under US sanctions.
The gas crisis in Europe, just beginning, has shown that the health of the European economy is entirely in the hands of Russia. European politicians are now ready for peace talks on Ukraine, the launch of gas pipelines, the lifting of sanctions. In the autumn, with the arrival of the first frosts and the publication of statistics on the German economy, Europe will be ready to sign the act of surrender. Germany’s economic miracle ended in Ukraine.
Translation: V. Sergeev
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